RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/243 
11 January 2011  
 
(11-0046) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
JAPAN 
 
  
 
This report, prepared for the tenth Tr ade Policy Review of Japan, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Ja pan on its trade policies and practices. 
 
Any technical questions arising from this report may be addressed to Masahiro 
Hayafuji (00 22 739 5873). 
 
Document WT/TPR/G/243 contains the policy statement submitted by Japan. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Japan. Japan WT/TPR/S/243 
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CONTENTS 
 
    Page 
SUMMARY   vii 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AIN ECONOMIC DEVELOPMENTS  1 
 (2) M ACROECONOMIC POLICIES  2 
 (3) S TRUCTURAL POLICIES  3 
 (i) Services sector 3 
 (ii) Labour market 5  (iii) Tax reform 5 
 (2) D
EVELOPMENTS IN TRADE AND FOREIGN DIRECT INVESTMENT  6 
 (i) Composition of merchandise trade 7  (ii) Direction of merchandise trade 7 
 (iii) Foreign direct investment 10 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 11 
 (1) I
NTRODUCTION  11 
 (2) T RADE POLICY OBJECTIVES  12 
 (3) T RADE POLICY FORMULATION AND EVALUATION  12 
 (i) Trade policy formulation and implementation 12 
 (ii) Transparency and policy evaluation 14 
 (4) T RADE AGREEMENTS AND ARRANGEMENTS  17 
 (i) WTO 17 
 (ii) Regional trade agreements 17  (iii) Generalized System of Preferen ces and other preferential arrangements 
adopted unilaterally by Japan 20 
 (iv) Other bilateral/regional arrangements 22 
 (5) A
ID FOR TRADE  24 
 (6) F OREIGN INVESTMENT REGIME  27 
 (i) Regulatory regime 28  (ii) Investment promotion measures 30 
III. TRADE POLICIES AND PRACTICES BY MEASURE 31 
 (1) I
NTRODUCTION  31 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  32 
 (i) Customs clearance procedures and valuation 32 
 (ii) Tariffs 34  (iii) Rules of origin 40 
 (iv) Non-tariff border measures 40 
 (v) Contingency measures 42 
 (vi) Government procurement 43 
 (vii) State trading 47  (viii) Standards, technical regulations, an d sanitary and phytosanitary measures 48 
 (ix) Import promotion measures 56 
 
  WT/TPR/S/243 Trade Policy Review 
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    Page 
(3) M EASURES DIRECTLY AFFECTING EXPORTS  56 
 (i) Procedures 56 
 (ii) Export taxes, charges, and levies 57  (iii) Border adjustment in respect of internal taxes 57 
 (iv) Export prohibitions, restrictions, and licensing 58 
 (v) Export cartels 59  (vi) Export promotion schemes 59 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  59 
 (i) Taxation and tax-related assistance 59  (ii) Subsidies and other financial assistance 62 
 (iii) State-owned enterprises, co rporatization, and privatization 63 
 (iv) Intellectual property rights 64  (v) Regulatory reform 68 
 (vi) Competition policy 69 
 (vii) Corporate governance 74 
IV. TRADE POLICIES BY SECTOR 76 
 (1) I
NTRODUCTION  76 
 (2) A GRICULTURE  76 
 (i) Structure 76 
 (ii) Border measures 78  (iii) Domestic measures 82 
 (3) M
ANUFACTURING  83 
 (4) E NERGY AND UTILITIES  84 
 (5) S ERVICES  85 
 (i) Financial services 85 
 (ii) Telecommunications 90  (iii) Transport 91 
 (iv) Medical services 93 
REFERENCES   95 
APPENDIX TABLES  97 
 
  
 
 Japan WT/TPR/S/243 
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  Page 
CHARTS 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Composition of merchandise trade, 2007 and 2009 8 
I.2 Direction of merchandise trade, 2007 and 2009 9  
III. TRADE POLICIES AND PRACTICES BY MEASURES 
 
III.1 Share of non- ad valorem  duties, by HS section, FY2010 37 
III.2 Simple average applied MFN tariff rates, by HS section, FY2008 and 2010 38 
III.3 Import control system, 2010 41  
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Selected macroeconomi c indicators, 2005-09 1 
I.2 Shares of GDP and employment by sector, 2006-09 4 
I.3 Balance of payments, 2006-10 6  
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
 
II.1 Major trade-related laws and regulations, October 2010 13 
II.2 Ten largest GSP beneficiaries, FY2008 21 
II.3 Japan's aid-for-trade commitments, 2002-08 24  
III. TRADE POLICIES AND PRACTICES BY MEASURES 
 
III.1 Structure of the MFN tariff, 2006-10 35 
III.2 Preferential tariff rates, FY2010 39 
III.3 Procurement by product and by origin, 2007 and 2008 46 III.4 Main standards and technical regulations in Japan, 2009 50 
III.5 National government tax revenue, FY2009 and FY2010 60 
III.6 Suspension of imports likely to infringe intellectual property rights, 2007-09 67 III.7 Exemptions from the Anti-monopoly Act, June 2010 70 
III.8 Enforcement of competition policy, 2005-09 73 
 
IV. TRADE POLICIES BY SECTOR 
 
IV.1 Applied MFN tariff protection in agriculture, FY2010 79 
IV.2 Special safeguards in agriculture, FY2008 to 2010 80 
IV.3 Financial institutions, 2009 87 
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   Page 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
AI.1 Merchandise exports by group of products, 2005-09 99 
AI.2 Merchandise imports by group of products, 2005-09 100 
AI.3 Merchandise exports by destination, 2005-09 101 AI.4 Merchandise imports by origin, 2005-09 102 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
AII.1 Status of selected notifications to the WTO, August 2010 103 
AII.2 Disputes to which Japan has been a party, 2009 to August 2010 105 
AII.3 Overview of Japan's Free-Trade Agreements, October 2010 107 AII.4 Industries requiring prior not ification for inward FDI, 2010 110 
 
III. TRADE POLICIES AND PRACTICES BY MEASURES 
 
AIII.1 Applied tariff escalation and tariff ranges, FY2008 and FY2010 112 
AIII.2 Legislation on intellectual property rights, October 2010 115 
 
IV. TRADE POLICIES BY SECTOR 
 
AIV.1 Tariff quota quantity and in-quota imports, FY2005-08 116 
 
 Japan WT/TPR/S/243 
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SUMMARY 
1. Since its previous Trade Policy Review in 
2009, Japan has refrained from introducing new 
trade barriers, notwithstanding the onset of the global financial crisis; on the other hand, it has 
introduced few measures aimed at further 
liberalizing its trade and trade-related regime.    
2. Mainly as a result of the crisis, the 
Japanese economy contracted during the period 
under review owing to the sharp fall (by 25% in 2009) in exports, which have traditionally been the 
main engine of Japan's economic growth.  Against 
this background, Japan' s current account surplus 
narrowed to 3.3% of GDP in 2009 (from 4.8% in 
2007).  However, a subsequent rebound in exports 
has boosted growth, with real GDP projected to grow by 2.8% in 2010. 
3. To mitigate the adverse impact of the 
initial drop in exports on growth,  the Government 
has instituted a series of stimulus packages 
(totalling 4.7% of GDP) since August 2008 in order to stimulate domestic demand.  The stimulus 
packages have focused largely on increased 
spending.  Consequently, the fiscal deficit rose to 10% of GDP in 2009 an d public debt reached 
roughly 220% of GDP.  The fiscal stimulus 
packages were complemented by accommodative monetary policy, with near-zero interest rates, 
adopted under the persistent deflationary 
environment in Japan.  In addition, however, the yen appreciated against all major currencies.  If 
sustained, this would tend to reduce the 
international competitiveness of Japan's exporters, thus jeopardizing export-led growth, unless their 
productivity can be substantially improved.     
4. While looser macroeconomic policies 
have helped Japan's economy to recover from the 
global financial crisis, they do not address its long-
standing structural problems (including the rapid 
aging of its population) that are reflected in 
sluggish growth during the past decade or so in both real GDP and total factor productivity (TFP), 
a key determinant of Japanese firms' international 
competitiveness.  These problems can be addressed more effectively by far-reaching structural reforms, 
of which trade liberalization (and the resulting 
stimulus to competition) is an integral part.  However, structural reforms have, if anything, 
slowed since 2009. 
5. The authorities do recognize the need for 
structural reform, particularly to improve productivity in the services sector (which is much 
lower than in manufacturing).  In June 2010, it 
introduced a New Growth Strategy, focusing on 
seven priority areas (i.e. environment and energy, medical and health care, economic integration with 
other Asian countries, tourism and revitalization of 
regional economies, science and technology, human resources, and fina ncial services).  In 
addition, as regards tax re form, considering Japan's 
relatively low share of taxes in GDP, the authorities recognize the need to rend er the income tax system 
more neutral with respect to investment and other 
economic decisions by broadening the tax base and cutting relatively high corporate tax rates.  Hence, 
the Government plans to reduce tax incentives and 
cut the statutory corporate tax rate from 40% to 35% from the next fiscal year.  To the extent that 
the present high corporate tax rate discourages 
inward foreign direct investment (FDI), the lower 
rate could also stimulate such FDI, which is a much 
smaller percentage of GDP than in other large OECD economies.  Sin ce its previous Review, 
Japan has adopted measures to facilitate the 
approval of FDI. 
6. While administrative organs are required 
to conduct ex-ante evaluation of regulations, and a 
procedure for ex-ante regu latory impact analysis 
has been introduced, cost-benefit analysis is not 
frequently used when formulating, revising, or 
abolishing policies and measures;  such analysis is rarely used to evaluate existing measures, such 
tariff and non-tariff protection of agriculture, or to 
evaluate the economic effects of preferential trade agreements (PTAs).  Th e recent publication of 
quantitative analysis regarding the possible 
economic effects of Japan's participating in the Trans Pacific Partnership initiative is one of the 
few notable exceptions. Publication of such 
quantitative analysis by the Government can help it 
adopt trade and related policies and measures that 
are more cost-effective.     
7. In the period under review, Japan has been 
a party to four disputes, one as a respondent and 
three as a complainant.   
8.
 During the period under review, two 
bilateral trade agreements, or Economic 
Partnership Agreements (EPAs), entered into force (with Switzerland and with Viet Nam);  several 
others are being negotiated.  Japan considers that 
its regional and bilateral trade agreements complement the multilateral system, while it 
acknowledges that the level of complication 
increases as entry into force of such agreements WT/TPR/S/243 Trade Policy Review 
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progresses.  The PTAs that Japan has adopted also 
involve, inter alia,  trade facilitation, investment, 
movement of natural persons and competition 
policy.  However, the agreements with countries that are significant exporters of agricultural 
products tend to exclude many of these products.  
They also exclude certain i ndustrial goods, such as 
leather products and footwear, which the 
authorities consider to be highly sensitive.  These 
products are also larg ely excluded from the 
Generalized System of Preference (GSP) scheme, 
under which Japan grants preferential treatment to 
products from certain developing and least developed countries.   
9. The tariff continues to be Japan's main 
border instrument.  In fi scal year (FY) 2010, the 
simple average applied MFN tariff rate was 5.8%, 
down from 6.1% in FY200 8, reflecting a decrease 
in the average ad valorem  equivalents (AVEs) of 
non-ad valorem  duties.  Non- ad valorem  duties, 
which account for 6.6% of Japan's tariff lines, tend to involve high AVEs, and are an important feature 
of Japan's tariff, particularly for agricultural 
products.  Whereas the simple average tariff rate under the GSP is 4.6% (down from 4.9% in 
FY2008), that for LDCs is 0.5% (the same as in 
FY2008).  Japan's simple average tariff rates under 
bilateral PTAs range from 2.9% to 3.4%.   
10. Japan's non-tariff border measures include 
some import prohibitions and quantitative import restrictions (for example, import quotas on some 
fish).  State trading invo lves leaf tobacco, opium, 
rice, wheat and barley, and milk products.   
11. Japan makes little use of contingency 
measures.  It has continued to apply two anti-
dumping measures during the review period, but eliminated one countervailing measure;  it has not 
imposed any safeguard measures since 2001. 
12. Japan maintains certain export controls on 
national security and public safety grounds and to 
preserve natural resources in accordance with international agreements (such as CITES).  Export 
finance, insurance, and guarantees are available.  
Duty drawback schemes are available on selected inputs for certain manufacturing, but they do not 
necessarily refund 100% of duties paid.  The 
Government has recently begun promoting agricultural exports, mainly by providing 
information to consumers overseas. 
13. About 46% of Japanese Industrial 
Standards (JIS) were aligned to international standards in 2009 (unchanged since 2008).  
Although Japan maintains that its SPS measures are 
based on scientific assessment of risks, it has 
apparently not conducted cost-benefit analysis in this connection. 
14. Various laws on intellectual property 
rights (IPRs) have been amended since Japan's previous Review with a view to, inter alia,  
strengthening the role of Customs in enforcement 
and expanding the scope of application of criminal penalties for infringement of trade secrets.  Japan 
remains an active participant in multinational and 
regional discussions on agreements to promote international harmonization of regimes protecting 
IPRs. 
15. The authorities intend to continue to 
strengthen competition policy.  In this regard, the 
Anti-monopoly Act was amended in June 2009 to, 
inter alia , introduce a surcharge (fine) in respect of 
practices involving exclusionary types of private 
monopolization, and a 50% increase in the surcharge on businesses that have played a leading 
role in cartels and bid-rigging.   
16. With regard to agriculture, whose labour 
productivity remains much lower than in the rest of 
the economy, the Government has continued to 
move away from price support toward income 
support.  However the sector continues to receive 
substantial government support, which involves, 
inter alia,  a relatively higher average applied MFN 
tariff rate compared with other sectors, tariff 
quotas, income support, and, in some sub-sectors, 
production controls.  
17. Manufacturing, whose labour productivity 
is higher than in the rest of the economy, remains 
open and subject to competition. However, it would appear that during the period under review, 
government support to the sector increased through 
the Enterprise Turnaround Initiative Corporation 
(ETIC). 
18. Certain services continue to be subject to, 
inter alia,  licensing and restrictions on foreign 
investment;  as in many other sectors, they are also 
faced with the generally high cost of doing business in Japan, which has been considered as 
one of the main deterrents to inward FDI in 
services and thus competition in the services sector.  Furthermore, it appears that trade-related reforms 
initiated in the services sector have slowed, with 
the notable exception of liber alization of air traffic 
through the pursuit of "open sky" agreements, Japan WT/TPR/S/243 
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which has increased competition in the sector.  At 
the same time, however, partially as a result of 
intensified competition, the Government authorised 
the rescue of Japan Air Lines by the ETIC and the Development Bank of Japan. The privatization of 
Japan Post, a reform that was regarded as a 
"landmark" when it was initiated in 2007, has been under review since 2009 with a view, inter alia,  to maintaining the postal network.  Despite some 
volatility in domestic capital markets affected by 
the global financial crisis, Japanese banks emerged, 
by and large, relatively unscathed.  Nonetheless, the Government put in pl ace a number of measures 
for both banks and securities firms to mitigate the 
impact of the crisis.